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ENGLISH MARINE INSURANCE AND GENERAL AVERAGE LAW

Lloyd's Maritime and Commercial Law Quarterly

ENGLISH MARINE INSURANCE AND GENERAL AVERAGE LAW

Barıs¸ Soyer *

CASES

196. ABN Amro Bank NV v Royal & Sun Alliance Insurance Plc 1

Marine insurance—credit risks—duty of disclosure—effect of non-avoidance clause—misrepresentation—affirmation—estoppel by convention—due diligence clause—sue and labour
ABN Amro Bank was insured under a marine policy placed with 14 subscribing underwriters led by Royal & Sun Alliance Insurance Plc for the period of 1 February 2016 to 21 January 2017. Two of the assured’s customers defaulted on a series of “repo” financing deals over cacao and cacao products. Senior executives of both of these companies were convicted and imprisoned in the USA for fraud. These companies ultimately became insolvent and the goods held by way of security by the assured proved to be substandard and of little resale value. The assured sought to recover its losses under the marine insurance contract, which contained a bespoke clause (the Transaction Premium Clause (TPC)) stipulating that cover was available for amounts “that the Insured would otherwise would have received and/or earned in the absence of a default by a customer”. The underwriters denied liability under the policy.
Decision: Most of the underwriters were liable under the policy on true construction of the TPC. Various defences raised by most underwriters were rejected. However, the claim of the assured against two underwriters (Ark and Advent) failed. Also the brokers were liable to the assured in respect of the indemnity the assured would have received from Ark and Advent under the policy.
Held: (1) The TPC provided stand-alone financial loss coverage and applied where there was no physical loss and damage to the insured cargo.2
(2) The insurance policy could not be rectified so as to give effect to what was said in conversations and the mutual intentions of the leading underwriter and the brokers. There was also no estoppel or collateral contract affecting the operation of the TPC.
* Professor of Commercial and Maritime Law, Director, Institute of International Shipping and Trade Law, Swansea University.
1. [2021] EWHC 442 (Comm) (Jacobs J).
2. In reaching this conclusion, the Court made reference to recent authorities, such as Rainy Sky SA v Kookmin Bank [2011] UKSC 50; [2012] 1 Lloyd’s Rep 34, Arnold v Britton [2015] UKSC 36; [2015] AC 1619 and Wood v Capita Insurance Services Ltd [2017] UKSC 24; [2018] Lloyd’s Rep Plus 13; [2017] AC 1173, which emphasise the significance of the wording used when considering the meaning of a clause used in commercial contracts.
English Marine Insurance and General Average Law

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